ACCY 201 Practice Final Exam PDF

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ACCY 201 – Practice for Final Exam – Spring 2014

Questions – Part I 1. Barnes Company showed the following balances at the end of its first year: Cash $11,000 Prepaid insurance 700 Accounts receivable 3,500 Accounts payable 2,800 Notes payable 4,200 Common stock 5,400 Dividends 700 Revenues 21,000 Expenses 17,500 What did Barnes Company show as total credits on its trial balance? A) $33,400 B) $34,100 C) $34,800 D) $32,700

2. The periodicity assumption states that the economic life of a business can be divided into A) perpetual time periods. B) artificial time periods. C) cyclical time periods. D) equal time periods. 3. Elston Company compiled the following financial information as of December 31, 2012: Revenues $420,000 Common stock 90,000 Equipment 120,000 Expenses 375,000 Cash 105,000 Dividends 30,000 Supplies 15,000 Accounts payable 60,000 Accounts receivable 45,000 Retained earnings, 1/1/12 225,000 Elston's assets on December 31, 2012 are: A) $705,000 B) $285,000 C) $510,000 D) $240,000

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ACCY 201 – Practice for Final Exam – Spring 2014

4. Resources owned by a business are referred to as A) stockholders' equity. B) assets. C) revenues. D) liabilities.

5. Liabilities are generally classified on a balance sheet as A) small liabilities and large liabilities. B) present liabilities and future liabilities. C) tangible liabilities and intangible liabilities. D) current liabilities and long-term liabilities. 6. In the first month of operations, the total of the debit entries to the Cash account amounted to $1,400 and the total of the credit entries to the Cash account amounted to $600. The Cash account has a A) $800 debit balance. B) $600 credit balance. C) $1,400 debit balance. D) $800 credit balance. 7. Accounting is the information system that ____________________, ____________________, and ______________________________ the economic events of an organization to interested users. A) identifies, records, and communicates B) identifies, informs, and analyzes C) analyzes, records, and informs D) records, analyzes, and issues 8. An accounting record that includes a list of accounts and their balances at a given time is called a A) trial balance. B) general ledger. C) chart of accounts. D) general journal.

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ACCY 201 – Practice for Final Exam – Spring 2014

9. At October 1, 2012, Metz Industries had an Accounts Payable balance of $60,000. During the month, the company made purchases on account of $50,000 and made payments on account of $80,000. At October 31, 2012, the Accounts Payable balance is A) $20,000 credit B) $80,000 credit C) $30,000 credit D) $60,000 debit 10. The recording process occurs A) once a year. B) once a month. C) repeatedly during the accounting period. D) infrequently in a manual accounting system.

11. Howard Company had a transaction that caused a $5,000 increase in both assets and total liabilities. This transaction could have been a(n): A) Purchase of office equipment for $5,000 cash. B) Investment of $5,000 cash in the business by the stockholders. C) Repayment of a $5,000 bank loan. D) Purchase of office equipment for $12,000, paying $7,000 cash and issuing a note payable for the balance.

12. Which of the following is not an accounting assumption? A) Periodicity B) Integrity C) Going concern D) Economic entity

13. Issuing shares of stock in exchange for cash is an example of a(n) A) operating activity. B) delivering activity. C) financing activity. D) investing activity. 14. Lankston Company began the year by issuing $60,000 of common stock for cash. The company recorded revenues of $550,000, expenses of $480,000, and paid dividends of $30,000. What was Lankston's net income for the year? A) $40,000 B) $100,000 C) $70,000 D) $130,000

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ACCY 201 – Practice for Final Exam – Spring 2014

15. If total liabilities increased by $42,000 during a period of time and stockholders' equity decreased by $18,000 during the same period, then the amount and direction (increase or decrease) of the period's change in total assets is a(n) A) $24,000 decrease. B) $24,000 increase. C) $42,000 increase. D) $60,000 increase. 16. Which of the following organizations issues accounting standards for countries outside the United States? A) SEC B) GAAP C) IASB D) FASB

17. Based on the following data, what is the amount of current assets? Accounts payable Accounts receivable Cash Intangible assets Inventory Long-term investments Long-term liabilities Short-term investments Notes payable Plant assets Prepaid expenses A) $350,000 B) $210,000 C) $212,000 D) $192,000

$62,000 100,000 30,000 100,000 138,000 160,000 200,000 80,000 56,000 1,340,000 2,000

18. Different companies using the same accounting principles is an application of A) materiality. B) consistency. C) comparability. D) full disclosure.

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ACCY 201 – Practice for Final Exam – Spring 2014

19. The usual sequence of steps in the recording process is to A) analyze each transaction, enter the transaction in the journal, and transfer the information to the ledger accounts. B) analyze each transaction, enter the transaction in the book of original entry, and transfer the information to the journal. C) analyze each transaction, enter the transaction in the ledger, and transfer the information to the journal. D) analyze each transaction, enter the transaction in the book of accounts, and transfer the information to the journal.

20. These are selected account balances on December 31, 2012. Land $100,000 Land (held for future use) 150,000 Buildings 600,000 Inventory 200,000 Equipment 450,000 Furniture 100,000 Accumulated Depreciation 300,000 What is the total amount of property, plant, and equipment that will appear on the balance sheet? A) $1,300,000 B) $1,600,000 C) $950,000 D) $1,100,000

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ACCY 201 – Practice for Final Exam – Spring 2014

Exercise 1 21

Assets

22

Liabilities

23

Common Stock

24

Revenues

25

Expenses

26

Retained Earnings

27

Dividends

28

Accounts Receivable

29

Accounts Payable

30

Unearned Revenue

Instructions: For each account, tell me whether the normal balance is DEBIT or CREDIT using the legend below. Record your answers on the SCANTRON. Exercise 1 Legend DEBIT a CREDIT b

Exercise 2 31

Rent Expense

32

Common Stock

33

Unearned Revenue

34

Service Revenue

35

Land

36

Cash

37

Accounts Payable

38

Accounts Receivable

39

Prepaid Insurance

40

Retained Earnings

Instructions: For each account, match the type of account to the legend below. Each answer can be used more than once. Record your answers on the SCANTRON.

a b c d e

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Exercise 2 Legend Assets Liabilities Equity Revenues Expenses

ACCY 201 – Practice for Final Exam – Spring 2014

EXERCISE 3 Classify the following accounts of Lollipop Guild, Inc. into their proper balance sheet classifications using the legend below. Record your answers on the SCANTRON. Current Assets = A Property, Plant & Equipment = B

Intangible Assets = C Current Liabilities = D

Long-Term Liabilities = E

41

Accounts Payable

45 Prepaid Insurance

42

Accounts Receivable

46 Accumulated Depreciation - Equip

43

Unearned Revenue

47 Buildings

44

Notes Payable (more than 1 year)

48 Trademarks

EXERCISE 4 Identify the statement upon which each of the following accounts of Hunk, Hickory, & Zeke Company and appears using the legend below. Record your answers on the SCANTRON. Balance Sheet = A

Income Statement = B

Retained Earnings = C

49

Accounts Payable

57

Rent Expense

50

Accounts Receivable

58

Retained Earnings,

51

Cash

59

Sales Revenue

52

Common Stock

60

Service Revenue

53

Dividends

61

Supplies

54

Equipment

62

Unearned Revenue

55

Interest expense

63

Utilities Expense

56

Maintenance expense

64

Wages Expense

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ACCY 201 – Practice for Final Exam – Spring 2014

Answer Key – Part I 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46.

A B B B D A A A C C D B C C B C A C A C A B B B A B A A B B E C B D A A B A A C D A D E A B

47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64.

B C A A A A C A B B B C B B A A E E

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ACCY 201 – Practice for Final Exam – Spring 2014

Questions – Part II 1. The periodicity assumption states that: A) a transaction can only affect one period of time. B) estimates should not be made if a transaction affects more than one time period. C) adjustments to the enterprise's accounts can only be made in the time period when the business terminates its operations. D) the economic life of a business can be divided into artificial time periods. 2. The expense recognition principle matches: A) customers with businesses. B) expenses with revenues. C) assets with liabilities. D) creditors with businesses. 3. Under the accrual basis of accounting: A) cash must be received before revenue is recognized. B) net income is calculated by matching cash outflows against cash inflows. C) events that change a company's financial statements are recognized in the period they occur rather than in the period in which cash is paid or received. D) the ledger accounts must be adjusted to reflect a cash basis of accounting before financial statements are prepared under generally accepted accounting principles.

4. Given the data below for a firm in its first year of operation, determine net income under the accrual basis of accounting. Revenue earned $14,000 Accounts receivable 3,000 Expenses incurred 7,250 Accounts payable (related to expenses) 750 A) $6,750 B) $9,000 C) $4,500 D) $7,200 5. Adjusting entries are made to ensure that: A) expense are recognized in the period in which they are incurred. B) revenues are recorded in the period in which they are earned. C) balance sheet and income statement accounts have correct balances at the end of an accounting period. D) All of the above.

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ACCY 201 – Practice for Final Exam – Spring 2014

6. Screech’s Laundry Company purchased $6,500 worth of laundry supplies on June 2 and recorded the purchase as an asset. On June 30, an inventory of the laundry supplies indicated only $2,000 on hand. The adjusting entry that should be made by the company on June 30 is: A) debit Laundry Supplies Expense, $2,000; credit Laundry Supplies, $2,000. B) debit Laundry Supplies, $4,500; credit Laundry Supplies Expense, $4,500. C) debit Laundry Supplies, $2,000; credit Laundry Supplies Expense, $2,000. D) debit Laundry Supplies Expense, $4,500; credit Laundry Supplies, $4,500. 7. The Hot Sundaes Company purchased a computer for $3,000 on December 1. It is estimated that annual depreciation on the computer will be $600. If financial statements are to be prepared on December 31, the company should make the following adjusting entry: A) debit Depreciation Expense, $600; credit Accumulated Depreciation, $600. B) debit Depreciation Expense, $50; credit Accumulated Depreciation, $50. C) debit Depreciation Expense, $2,400; credit Accumulated Depreciation, $2,400. D) debit Office Equipment, $3,000; credit Accumulated Depreciation, $3,000.

8. Depreciation is the process of: A) valuing an asset at its fair market value. B) increasing the value of an asset over its useful life in a rational and systematic manner. C) allocating the cost of an asset to expense over its useful life in a rational and systematic manner. D) writing down an asset to its real value each accounting period. 9. Gross profit equals the difference between A) net income and operating expenses. B) net sales revenues and cost of goods sold. C) net sales revenues and operating expenses. D) net sales revenues and cost of goods sold plus operating expenses.

10. Which statement is incorrect? A) Periodic inventory systems provide better control over inventories than perpetual inventory systems. B) Computers and electronic scanners allow more companies to use a perpetual inventory system. C) Freight-in is debited to merchandise inventory when a perpetual inventory system is used. D) Regardless of the inventory system that is used, companies should take a physical inventory count.

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ACCY 201 – Practice for Final Exam – Spring 2014

11. The credit terms offered to a customer by a business firm were 2/10, n/30, which means A) the customer must pay the bill within 10 days. B) the customer can deduct a 2% discount if the bill is paid between the 10th and 30th day from the invoice date. C) the customer can deduct a 2% discount if the bill is paid within 10 days of the invoice date. D) two sales returns can be made within 10 days of the invoice date and no returns thereafter. 12. Goods held on consignment are A) never owned by the consignee. B) included in the consignee's ending inventory. C) kept for sale on the premises of the consignor. D) included as part of no one's ending inventory. 13. If goods in transit are shipped FOB destination A) the seller has legal title to the goods until they are delivered. B) the buyer has legal title to the goods until they are delivered. C) the transportation company has legal title to the goods while the goods are in transit. D) no one has legal title to the goods until they are delivered. 14. The LIFO inventory method assumes that the cost of the latest units purchased are A) the last to be allocated to cost of goods sold. B) the first to be allocated to ending inventory. C) the first to be allocated to cost of goods sold. D) not allocated to cost of goods sold or ending inventory.

15. At May 1, 2012, the Friends Forever Company had beginning inventory consisting of 100 units with a unit cost of $7. During May, the company purchased inventory as follows: 200 units at $7 300 units at $8 The company sold 500 units during the month for $12 per unit. The Friends Forever Company uses the average cost method. The average cost per unit for May is A) $7.00. B) $7.50. C) $7.60. D) $8.00.

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ACCY 201 – Practice for Final Exam – Spring 2014

16. At December 31, 2012 Morris Company's inventory records indicated a balance of $652,000. Upon further investigation it was determined that this amount included the following: • $112,000 in inventory purchases made by Morris shipped from the seller 12/27/12 terms FOB destination, but not due to be received until January 2nd • $74,000 in goods sold by Morris with terms FOB destination on December 27th. The goods are not expected to reach their destination until January 6th. • $6,000 of goods received on consignment from Dollywood Company What is Morris's correct ending inventory balance at December 31, 2012? A) $540,000 B) $646,000 C) $460,000 D) $534,000

17. When is a physical inventory usually taken? A) When goods are not being sold or received. B) When the company has its greatest amount of inventory. C) At the end of the company's fiscal year. D) Both (b) and (c). 18. Two categories of expenses in merchandising companies are A) cost of goods sold and financing expenses. B) operating expenses and financing expenses. C) cost of goods sold and operating expenses. D) sales and cost of goods sold. 19. When using a perpetual inventory system, why are discounts credited to Inventory? A) The discounts are debited to discount expense and thus the credit has to be made to merchandise inventory. B) The discounts reduce the cost of the inventory. C) The discounts are a reduction of business expenses. D) None of the answers is correct. 20. Under the perpetual system, cash freight costs incurred by the buyer for the transporting of goods is recorded in which account? A) Freight Expense B) Freight-in C) Inventory D) Freight-out

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ACCY 201 – Practice for Final Exam – Spring 2014

Answer Key – Part II 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

D B C A D D B C B A C A A C B D C C B C

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ACCY 201 – Practice for Final Exam – Spring 2014

Questions – Part III 1. Which of the following is not an internal control activity for cash? A) Banking facilities should be used as much as possible. B) Employees who have access to cash should be bonded. C) All payments should be made with currency, not checks. D) The amount of cash on hand should be kept to a minimum. 2. Which of the following would not be included in the definition of cash? A) Petty cash. B) Money on deposit in a bank. C) Coins. D) NSF checks.

3. M. Cornett is a corporation that sells breakfast cereal. Based on the accounts listed below, what are M. Cornett's total trade receivables? Income tax refund due $ 500 Advance due to the company from 300 the company president 3-month note due from M. Cornett's main customer 2,000 Interest due this month on the above note 100 Due and unpaid from this month's sales 5,000 Due and unpaid from last month's sales 1,000 A) $8,900 B) $7,000 C) $6,000 D) $8,000

4. The book value of an asset is equal to the A) blue book value relied on by secondary markets. B) replacement cost of the asset. C) asset's cost less accumulated depreciation. D) asset's fair value less its historical cost. 5. The reconciliation of the cash register tape with the cash in the register is an example of A) establishment of responsibility. B) other controls. C) segregation of duties. D) independent internal verification.

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ACCY 201 – Practice for Final Exam – Spring 2014

6. Internal controls are not designed to safeguard assets from A) unauthorized use. B) natural disasters. C) employee theft. D) robbery.

7. Depreciation is a process of A) cost accumulation. B) asset valuation. C) asset devaluation. D) cost allocation. 8. Which of the following is not a suggested procedure to establish internal control over cash disbursements? A) Blank checks are stored with limited access. B) The bank statement is reconciled monthly. C) Different individuals approve and make the payments. D) Anyone can sign the checks.

9. Doane Company receives a $5,000, 3-month, 6% promissory note from Ray Company in settlement of an open accounts receivable. What entry will Doane Company make upon receiving the note? A) Notes Receivable 5,000 Accounts Receivable—Ray Company 5,000 B) Notes Receivable 5,000 Interest Receivable 75 Accounts Receivable—Ray Company 5,000 Interest Revenue 75 C) Notes Receivable 5,025 Accounts Receivable—Ray Company 5,025 D) Notes Receivable 5,075 Accounts Receivable—Ray Company 5,000 Interest Revenue 75

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ACCY 201 – Practice for Final Exam – Spring 2014

10. Barber Company lends Monroe Company $20,000 on April 1, accepting a four-month, 6% interest note. Barber Company prepares financial statements on April 30. What adjusting en...